Four drive-by deals tap the primary; Diamondback gains; United Naturals active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 19 – Dealers had the pedal to the metal as the lights came up on Monday in the primary market with four issuers tapping the market in drive-by action.

Among them were Dave & Buster's Entertainment, Inc., Chobani, LLC, Starwood Property Trust, Inc. and Multi-Color Corp.

While the primary market was active, the secondary space started the week on soft footing as fading stimulus hope led to a sell-off in risk assets.

However, volume was light amid the weakness in the market as attention turned towards earnings and the new deals in the pipeline.

Several recent deals remained active in the secondary space and continued to perform well despite the down day for the market.

United Natural Foods Inc.’s 6¾% senior notes due 2028 (B3/CCC+) and Shift4 Payments, LLC’s 4 5/8% senior notes due 2026 (B2/B) were active.

While United Natural’s notes continued to improve, Shift4 Payments notes were little changed.

However, Ligado Networks LLC's 15½% first-lien PIK toggle notes were seen at a deep discount to their issue price in the secondary space.

Outside of recent deals, Diamondback Energy Inc.’s split-rated 3½% senior notes due 2029 were active and posting gains after S&P changed its outlook on the company to stable and affirmed their investment grade rating.

Monday’s primary

Dealers had the pedal to the metal as the lights came up on Monday in the primary market.

The session featured four drive-by deals, but only three had priced by press time (terms on Dave & Buster's Entertainment’s $500 million of five-year senior secured notes were pending).

Of the three that priced one came upsized and tight.

Chobani priced an upsized $425 million issue (from $325 million) of 4 5/8% eight-year senior secured notes (B1/B-) at the tight end of talk.

There was also a substantial buildup in the forward calendar, which housed $2.13 billion of business at Monday's close, all of it expected to clear ahead of Friday's close.

Conspicuous among the deals that began roadshows on Monday was Multi-Color's $500 million offering of LABL Intermediate Holding Corp. five-year senior PIK toggle notes, proceeds from which will be used to fund a shareholder dividend.

PIK toggle holdco deals backing dividends are customarily a harbinger of a hot market, sources say.

There are one or two Cassandras who maintain that PIK toggle holdco dividend deals tend to show up when that market is getting long in the tooth.

Initial talk has the Multi-Color deal coming with a cash coupon in the low 12% area with an additional 75 basis points for PIK payments, a trader said (see related stories in this issue).

Ligado

Very late on Friday terms surfaced on Ligado Networks’ $3.85 billion two-part secured PIK notes deal, a must-have refinancing as the satellite communications company was staring down the barrel of bankruptcy, market sources say.

“Allocations arrived just in time to enjoy with Saturday morning bagels and coffee,” one market source quipped.

Late allocations had been anticipated, as dealers were looking to damp down large-volume trades on the break, sources said.

The deal featured a $2.85 billion issue of three-year first-lien PIK notes (Caa1) that priced at par to yield 15½%.

Those notes were quoted at 95 late Monday by a trader who was not seeing any real markets.

Earlier they were quoted at 96½ bid, 97 offered, the trader said, adding that some investors obviously were stuffed in the deal, but were willing to take a five-point hit in order to stave off a Ligado bankruptcy.

The trader professed the expectation that “an avalanche” of the 15½% PIK paper is apt to soon become offered.

Also late Friday, Ligado priced a downsized $1 billion tranche of restructured 17½% 3.5-year second-lien PIK notes at 75 (see related story in this issue).

Active

United Natural’s 6¾% senior notes due 2028 and Shift4 Payments’ 4 5/8% senior notes due 2026 remained active in the secondary space although the notes were little changed.

United Natural’s 6¾% senior notes due 2028 were up about ¼ point to trade in the 102¾ to 103¼ context throughout Monday’s session, according to a market source.

More than $20 million of the bonds were on the tape.

Shift4 Payments’ 4 5/8% senior notes due 2026 continued to trade in the 102½ to 102¾ context on Monday.

There was more than $18 million in reported volume during the session.

United Natural Foods and Shift4 Payments both priced at par on Oct. 15 and immediately traded up to a 102-handle.

Diamondback Energy affirmed

Diamondback Energy’s split-rated 3½% senior notes due 2029 were active and posting gains on Monday after S&P affirmed their investment grade credit rating for the company’s unsecured debt.

The 3½% notes traded up to a 99-handle on Monday, closing the day at 99½, a source said.

There was more than $18 million of the bonds on the tape.

S&P changed its outlook for Diamondback to stable from negative and affirmed their BBB- rating for the oil and gas company’s unsecured debt. (See related article in this issue.)

Diamondback released a preliminary third-quarter operational update last week with the company reporting free cash flow and the expectation for oil production to increase in the fourth quarter.

The 3½% notes have been on an upswing since the update was provided on Oct. 13.

The notes were trading on a 97-handle prior to the update.

$249 million Friday inflows

The dedicated high-yield bond funds saw $249 million of net daily inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $169 million of inflows on the day.

Actively managed high-yield funds saw $80 million of inflows on Friday, the source said.

Indexes mixed

Indexes opened the week mixed.

The KDP High Yield Daily index gained 2 basis points to close Monday at 66.77 with the yield now 5.41%. The index was largely flat last week with a cumulative gain of 3 bps.

The ICE BofAML US High Yield index gained 10.1 bps with the year-to-date return now 1.175%.

The index was also largely flat on the week last week with a cumulative gain of 0.9 bps.

The CDX High Yield 30 index dropped 41 bps to close Monday at 105.33.

The index posted a cumulative loss of 55 bps on the week last week.

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